PARTICIPATION RATE: 93.5%
AVERAGE DEFERRAL RATE: 8%
DEFAULT DEFERRAL RATE: 6%
DEFAULT INVESTMENT: Principal LifeTime Portfolio
AUTOMATIC ENROLLMENT: Yes
AUTOMATIC ESCALATION: Yes—1% annually to 10%
EMPLOYER CONTRIBUTION: 100% on first 2% deferred, plus 50% of next 4%; discretionary profit-sharing contribution up to 10% of base salary
Nu Skin Enterprises, Inc., in Provo, Utah, develops and distributes anti-aging personal care products and nutritional supplements. The company operates in the direct selling channel, utilizing person-to-person marketing and other strategies to vend its wares.
Direct selling firms are typically not associated with running an exceptional retirement plan—but Nu Skin demonstrates exactly what is possible when there is corporate leadership buy-in to improve retirement readiness.
Several years ago, the firm’s CEO, Ritch Wood, envisioned and implemented a program called “Retire Ready” that included not just 401(k) plan enhancements, but also sizable annual budgets for financial wellness programs and a generous company profit-sharing scheme “tied to corporate profitability,” he says. In some years, the contribution to employee accounts has been as high as 15% of salary, though 10% is more usual, in addition to enhanced matching contributions.
According to Elaine Schurter, benefits manager, Retire Ready is a household name among Nu Skin employees that fosters a certain way of thinking about retirement saving and personal financial responsibility.
This is the result of concerted communication efforts, tied to offerings such as Dave Ramsey’s SmartDollar program; an annual financial fair encouraging the use of retirement and general financial planning tools; and one-on-one investment planning opportunities for every employee, delivered in partnership with the company’s independent adviser, 401k Advisors Intermountain.
A New Retirement Vision
Schurter credits Wood for providing the vision for Retire Ready and gives kudos to other leaders in the corporation for allowing her and the human resources (HR) staff to pour significant time and effort into maximizing the benefits programming.
“As benefits manager, I so appreciate the fact that I have support from the very top down of this company,” Schurter says. “I can tell you from experience, this buy-in is critical to creating and maintaining a high-functioning benefits program. So many times in the benefits manager role, you’re coming up with what you think are great ideas that will help employees, but then you just have to sit back and hope they will be approved by finance.”
As the company leadership focused more and more on retirement readiness, the committee worked with 401k Advisors Intermountain to conduct an intensive data gathering process, running each individual employee through an analysis to assess what amount of income that person is on track to replace in retirement, including with Social Security benefits.
Simply put, the replacement rates were unsatisfactory, and this prompted the committee to simulate various plan design changes and examine the effect of raising the replacement rates for the employee base. According to plan officials, the plan design optimization study led to more informed decisions by the committee and company executives—and ultimately to the installation of plan provisions that are still helping employees improve their retirement outlook today.
Doubling Down on Plan Design
On the ground, the Retire Ready campaign influences the behavior of the employer and the employees alike. Notably, the plan undergoes an independent third-party fee review quarterly, which proactively measures the value being received by the plan and employees versus the fees being charged.
The committee also progressively monitors asset allocations across the employee base—leveraging tools from Principal Financial, the recordkeeper—looking out for employees who are clearly invested outside of the typical recommended allocation based on their age, salary and savings rate. If and when such a situation is identified, the firms reach out to make sure the employee is informed and comfortable with his choices.
Supplementing these efforts, Nu Skin has “directly confronted the challenge of revenue sharing,” as Schurter puts it, and has in recent years moved to a flat-fee arrangement for recordkeeping. Asked whether this was a pet project of the committee, or if instead it was something participants were clamoring for, Schurter points firmly to the former.
“Modernizing and streamlining the cost structure of the plan is something that dedicated committees want to do, because they know it is the right thing, even if participants aren’t pushing for it and even if they might not even fully understand what we’re talking about,” Schurter says. “Having the third party come to us periodically and demonstrate for us what the latest best practices are has been very beneficial, in this respect.”
Wood and Schurter say Nu Skin is particularly proud of the numerical performance of its retirement plan, given that more than one-third of the participating employees are part-timers. And most of this part-time group are college students staffing call centers or warehouse facilities.
“The initial reaction from many of these folks upon hire is, ‘Why would I want to save for something that’s as far away as retirement?’” Schurter observes. “But through aggressive communications upfront, we impart to them the reality that they can’t afford not to start saving right now. We retain so many of these people in the plan, and I think that speaks to the strong design.”
The Next Step
Most recently the company has turned its attention to helping participants continue to make the most of the plan when they have actually reached and have entered retirement.
“We’ve had experts in to talk about Medicare benefits, Social Security, health care benefits and more,” Schurter says. “We’ve also brought in speakers to help employees who are getting ready to make the transition into retirement [work] out their income sources. Our employees have given such strong feedback on this type of education; we absolutely recommend it to other employers.”
“Retirement readiness is part of how we have to think about our employees,” Wood says, agreeing that this is a bottom line issue for any company. “Our desire is that our employees come and work for us for a long period of time—which means we are the company primarily responsible for their career as well as retirement.”
He encourages other executives to “think beyond the days the employee is at our company” and make benefits decisions accordingly. “True employee well-being consists of physical and emotional as well as financial factors, and all have both present and future consequences,” Wood concludes. “We have tried to broaden our view and will continue to find ways to make a positive difference in each of these areas of well-being.” —John Manganaro